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The Emperor Wears no Clothes in Theory: Theories Underlying Major US Policies are Problematic

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Another obstacle to markets operating freely in the U.S. is the external cost of production otherwise known as externalities.   Prices in a free market system are strictly determined by the interaction of buyers and sellers but in the case of externalities, some of the costs of production are not included in the price and hence buyers are not reacting to the true price.

 

Examples of externalities include health problems suffered by employees due to inadequate health protection in the workplace or environmental destruction caused as a by-product of production.   In both cases, these costs are paid by someone other than the buyer and seller and therefore interfere with the forces of supply and demand.

One of the key conditions of monopolistic competition is the non-coerced interaction of many buyers and sellers neither of whom are powerful enough to influence the behaviour of the market.   Ironically, in order to maintain monopolistic conditions, the government must step in with regulations to prevent either buyers or sellers from becoming too large despite the proviso of minimum government intervention.   In this case, government regulations are essential since there would be no free market given an oligopoly or monopoly in any sector of the economy.   The regulations become the lesser of two evils.

 

In many sectors of the American economy oligopolistic conditions do exist due to the relaxation of regulations such as the Glass Steagall Act.   When a few companies dominate the market in any sector of the economy, the realization of free markets is not possible.   These few companies have too much control over prices and can limit the ability of other potential producers from entering the market.

The agricultural sector is dominated by a few companies.   For example, three beef packers, namely Tyson, Cargill, JBS controlled 90% of the market in 2008.   Similarly, four pork packers, Smithfield Foods, Tyson Foods, Swift & Co. and Cargill, dominated 64% of the market in the same year.   Soybean crushing was dominated by three companies, ADM, Bunge, Cargill who controlled 71% of the market.                                                                                     

Increasing horizontal and sometimes vertical integration allows these big companies to set the prices and dictate terms to the farmer.   If a farmer refuses to accept a demand imposed by big corporations, they will lose their contract.   Such conditions are the best described as non-free markets.

 

Free markets clearly do not exist in the United States and the insistence on maintaining free markets by our leaders and legislators is simply an attempt to serve the interests of large corporations at the expense of the public.   Free markets have been one of the pretexts for not creating a single-payer healthcare system and for the race to privatize the educational system.   Cuts to social benefits are justified by the need to support the free market system.

 

Policies conceived in the U.S. foreign policy and defense communities are based on specific objectives and created on the basis of a foreign policy doctrine which has guided them at least since World War II.

This doctrine, based on the international relations theory of "realism", subordinates legal, ideological or moral considerations to national interests grounded in levels of power among states.   Realism assumes the belief that states are inherently aggressive, obsessed with security and only constrained from expansion by opposing powers and therefore the pursuit of national interests realistically must be the highest priority.

 

This doctrine is the key to understanding why American foreign policy regularly violates international law including the Geneva Conventions, Convention on Torture, Genocide Convention, the Inhumane Weapons Convention and the UN Charter and is the motivation to question the rationalizations and normalizations of foreign policy actions.

 

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I have been a professor of political science at Seneca College in Toronto. I have published five books the last of which "Selling Out: Consuming Ourselves to Death" was released in May/08. As well, I have been featured in CounterPunch, Z (more...)
 
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